What: AI inspires many retailers to automate call centers and chatbots. Alix Partners argues that other use cases are possible.

Why it is important: Creativity will be key for retailers willing to maximize their use of AI to get ahead of competition.

GenAI (Generative AI) is increasingly becoming integral in the retail sector, offering more substantial business impacts compared to other recent tech advancements like crypto and NFTs. Retailers are using GenAI for content creation and automating routine processes, particularly in call centers. However, its most significant potential lies in combining GenAI with machine learning (ML).

ML analyzes complex data to identify patterns for informed predictions, while GenAI generates new content like text, audio, and video. Their hybrid use can enhance hyper-personalization in marketing, creating a continuous improvement cycle. This combination can significantly improve customer count, basket size, and total trips, leading to notable revenue increases.

For instance, a nationwide specialty retailer implemented a custom marketing solution using ML and GenAI, resulting in a 30-45% increase in email open and click rates, directly correlating to revenue improvements. The process involves using AI and ML to identify high-potential customers based on customer lifetime value (CLV) and develop response propensity models. These models determine which customers are likely to make additional purchases and their likely purchases.

GenAI then crafts personalized offers and messages, with ML models creating micro-segments for tailored messaging. This approach leads to optimized messaging and a virtuous loop of increasing effectiveness.

The potential applications of GenAI and ML extend further, including matching customers with knowledgeable sales associates, implementing advanced marketing strategies, and deploying discount elasticity models to maximize margins. The integration of these technologies into existing processes can significantly enhance outcomes, making it a promising investment for retail businesses.

Combine machine learning with GenAI to multiply the business impact